The Semiconductor Stock No One Ever Talks About
Strong Fundamentals 🚀 and Top Dividend Growth 📈 (+200% in the last 5 years)
When you think of the semiconductor sector, you probably picture the same old names—companies that dominate the headlines and get all the attention. Think Nvdia, Broadcom, Texas Instruments, Intel and maybe Applied Materials.
But what if we told you there’s one company out there that’s quietly crushing it? 💥
This under-the-radar stock (debt free with a $7 billion market cap) has increased its dividend by a jaw-dropping 200% over the last five years. In an industry where dividends are often an afterthought, this kind of growth is exceptional. But here’s the kicker: it started paying a dividend in 2017, and every year since, it’s raised it by double digits 📊.
Our new Focus Stock has raised the dividend by double digits every year since 2018 with an average annual increase of 42.9% (really!!).
That’s not just strong growth. That’s a commitment to rewarding shareholders in a way most companies can only dream of. 💸
But why isn’t everyone talking about it? Could this be the hidden gem of the semiconductor world? 🤔
Read on to discover why this stock might just be the one you never hear about… but should definitely be watching. 👀
Find out more after the paywall...
Universal Display Corporation (OLED) is a leader in the development and commercialization of organic light-emitting diode (OLED) technologies, primarily for the display and lighting markets. UDC designs, manufactures, and supplies phosphorescent OLED materials and technologies that are crucial for producing OLED displays, which are used in everything from smartphones and televisions to wearables and automotive displays.
A Brief History
Founded in 1994, UDC began as a spin-off of Princeton University, focusing on developing organic electronics technology. The company’s breakthrough came with the invention of phosphorescent OLED materials, which allow displays to be brighter and more energy-efficient than traditional OLED technology. Over the years, UDC has become a key supplier to major display manufacturers and has played a pivotal role in shaping the OLED industry as we know it today.
The Dividend
Universal Display started with a 3 cent quarterly dividend in 2017, increasing it every year by double digits to the current $0.45 per share quarterly. On feb 20, 2025 the dividend was hiked by 12.5% marking 8 years of increases. At a stock price of $153.62 the dividend yhield for OLED is 1.2%. The average annual dividend hike in the last 8 years is a whopping 42.9%.
Key Activities
Universal Display Corporation is primarily involved in the following activities:
OLED Materials and Technologies: UDC supplies both small molecule and polymer-based OLED materials, which are essential for creating OLED displays and lighting products.
Licensing and R&D: UDC holds a vast portfolio of patents related to OLED technology, which it licenses to leading manufacturers around the globe.
OLED Technology Integration: The company is continuously advancing the development of new materials, improving efficiency, and expanding the applications of OLED technology, particularly in flexible and transparent displays.
Competitors
While Universal Display Corporation holds a dominant position in the OLED materials space, it faces competition from other companies working on similar technologies, including:
Samsung Display: A key player in the OLED display industry, particularly in the smartphone and television markets. Although Samsung is more of a competitor in display manufacturing than materials, it has also made significant investments in OLED technology.
LG Display: LG is another OLED display manufacturer that competes in the display sector. LG has been expanding its use of OLEDs in consumer electronics, particularly in televisions.
TOYOTA Tsusho Corp and Idemitsu Kosan: These companies are involved in the development and supply of OLED materials, albeit to a lesser extent than UDC.
Despite this competition, UDC’s strong patent portfolio and years of experience give it a significant advantage in the market.
The Moat
UDC’s moat is primarily driven by its intellectual property (IP). The company holds a large number of patents related to OLED materials and manufacturing processes. This gives it a competitive edge in the market by creating high barriers to entry for potential competitors. Moreover, UDC’s exclusive licenses with leading display manufacturers and its strong R&D focus ensure that it maintains its market leadership.
Additionally, UDC benefits from the growing adoption of OLED technology, which is increasingly preferred for its superior display quality, energy efficiency, and flexibility compared to traditional LCDs. This widespread adoption acts as a barrier to new entrants and reinforces UDC’s position as a critical player in the OLED supply chain.
Growth Drivers & Long-Term Opportunities
The growth prospects for Universal Display Corporation are substantial, driven by several key factors:
Expansion of OLED Adoption: OLED technology is becoming the go-to display technology in numerous industries, including smartphones, TVs, wearables, and automotive displays. As consumer demand for high-quality displays continues to grow, so will UDC’s revenues.
Next-Generation OLED Applications: UDC is working on expanding OLED’s applications into new markets, such as automotive lighting and wearable devices. Flexible and transparent OLED displays, for example, could open up entirely new sectors for the company.
Energy Efficiency & Sustainability: As the demand for energy-efficient technologies rises, OLEDs are becoming more attractive because they use less power than traditional displays, making them ideal for environmentally conscious consumers and industries.
Licensing Growth: As OLED adoption grows, UDC’s intellectual property portfolio will continue to generate revenue through licensing agreements. The company is strategically positioned to benefit from expanding global OLED production.
OLED Lighting Potential: While OLED displays are well-known, OLED lighting is a growing market where UDC has significant potential. OLED lighting is energy-efficient, offers unique design flexibility, and is a lighter alternative to traditional lighting solutions. This is still a relatively niche market, but it has long-term growth potential.
OLED and AI: Universal Display Corporation can benefit from AI in various ways. AI can help optimize the development of OLED materials and improve manufacturing processes, making production more efficient and cost-effective. Additionally, AI can assist in advancing OLED display quality through better image processing and enhancing product performance. As AI continues to improve, UDC could see further advancements in OLED technology, benefiting from both increased demand and innovation in the industry.
Key Financial Metrics for Universal Display Corp
Forward P/E for 2025: 31 (based on a stock price of $153.62)
Return on Invested Capital (ROIC): 17.3% in 2024
EBIT Margin: A steady 36-37% annually, expected to jump to 39% in 2025/2026
Revenue Growth: 12.4% in 2024 to $648 million, expected to grow by another 4% in 2025. Analysts expect double digit growth for 2026 and 2027.
Debt-Free: OLED had a net cash position of $492 million at the end of 2024, expected to grow to $755 million by the end of this year.
P/E Drop by 2027: The current P/E is expected to drop to 20 by 2027 based on analyst estimates.
Dividend Outlook: Double digit dividend growth is likely with free cash flow expected to grow to $239 million this year compared to an annual dividend payment of just $85 million.
Analyst ratings: Currently 9 analysts rate OLED a buy (‘buy’ or ‘strong buy’) with 3 ‘hold’ ratings and no sell recommendations. The average target price of $191 is 24% above current levels ($153.62)
Long-Term Outlook
Looking ahead, UDC is well-positioned for long-term growth. The company’s leadership in OLED technology, coupled with the rising demand for OLED displays and lighting, presents a compelling investment case. Additionally, the increasing shift towards flexible, transparent, and energy-efficient displays will continue to open up new growth opportunities. The continued adoption of OLED technology in consumer electronics, automotive displays, and other industries could help UDC maintain its competitive edge and deliver consistent returns over the next decade.
Conclusion
Universal Display Corporation remains one of the most promising and innovative companies in the semiconductor and display materials industry. With its strong IP portfolio, commitment to R&D, and a growing market for OLED technology, UDC is well-positioned for both short-term success and long-term growth. The company’s focus on expanding the use of OLED beyond traditional displays into new sectors like automotive and lighting also creates exciting opportunities for future growth. Despite competition, UDC’s moat and its pivotal role in the OLED ecosystem make it a stock worth keeping an eye on for years to come.
With a current yield of 1.2% and double-digit annual dividend increases, OLED looks promising, with strong growth expected in the next couple of years, which should lower the valuation. Additionally, the decline in stock price from its previous highs offers an attractive entry point.
Disclaimer: The information provided here is for informational purposes only and should not be considered financial advice. Investors should conduct their own research or consult with a financial advisor before making any investment decisions.